Cosmetics giant Estee Lauder has announced plans to reduce its workforce by up to 7,000 positions as part of a wide-reaching plan to boost profits and maintain growth.
Key Facts:
- Estee Lauder aims to cut between 5,800 and 7,000 roles worldwide.
- The company’s updated “profit recovery and growth plan” extends into fiscal 2027.
- It expects to incur up to $1.6 billion in pre-tax charges by the time restructuring is complete.
- The plan could save $800 million to $1 billion annually in pre-tax gross savings.
- Estee Lauder’s shares fell more than 17% following the announcement.
The Rest of The Story:
Estee Lauder explained that while earlier efforts had led to some improvement, inflation and lower sales volume offset those gains.
In response, the company unveiled an expanded turnaround plan focused on boosting profitability and shoring up long-term growth.
This plan includes several specific strategies: reorganizing supply chains, outsourcing certain services, and forming new partnerships to cut costs.
The company’s iconic brands—Mac, Clinique, Too Faced, and Bobbi Brown—remain at the forefront of its vision.
However, executives believe that right-sizing the workforce is necessary to keep Estee Lauder competitive in a shifting global market.
The company also highlighted a need to reduce overhead by consolidating supplier relationships, optimizing production, and eliminating unneeded inventory.
These measures aim to bring the business back to sustained sales growth and into a “solid double-digit adjusted operating margin” over the next few years.
Estée Lauder sinks nearly 20% on weak quarterly sales; plans to slash up to 7,000 jobs https://t.co/rpCnC9mgQR pic.twitter.com/uS1n8QwGu3
— New York Post (@nypost) February 4, 2025
CEO Stephane de La Faverie expressed confidence that the “Beauty Reimagined” plan will create a stronger foundation for the firm, enabling fresh investment in product innovation and consumer outreach.
Estee Lauder plans to carry out many of these changes in fiscal 2025 and 2026, with the overall restructuring expected to wrap up by fiscal 2027.
Commentary:
This situation appears to be a direct result of high inflation and challenging economic conditions under President Biden’s policies, often referred to as “Bidenomics.”
American families have been paying more for everyday goods, leaving less room for discretionary spending on items like cosmetics.
As the new administration’s approach takes effect, many expect the economy to improve and hope that similar stories of layoffs will be replaced with announcements of growth and hiring.
The Bottom Line:
Estee Lauder is betting on a sweeping reorganization to keep pace in a competitive industry.
By cutting expenses and pivoting toward growth, leaders hope to strengthen the company’s market share.
Shareholders are anxious to see whether these measures will restore profitability.
The next few years will likely be critical for Estee Lauder’s future.
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